Does the realtime game engine support soft-skin animation? By that I mean animation in which the geometry deforms, such as skeletal animation and/or morphing. Documentation I’ve seen seems to indicate that this is supported but is pretty vague. Meanwhile every demo I’ve seen animates characters via hierarchy animation (separate linked parts moving relative to each other;) no soft-skin animation.

Yes, it does indeed support skeletal animation. Makes animations a lot easier to make than the hierarchy mode. It can also morph from one animation to another by blending the animation frames which is quite cool.